Donegal Group Inc. Acquires Michigan Insurance Company
MARIETTA, Pa., Dec. 6, 2010 (GLOBE NEWSWIRE) -- Donegal Group Inc. (Nasdaq:DGICA) (Nasdaq:DGICB) announced that it had completed the acquisition of Michigan Insurance Company, which was formerly a majority-owned subsidiary of West Bend Mutual Insurance Company. The final purchase price will be calculated based on the GAAP book value of Michigan Insurance Company as of November 30, 2010. Donegal Group Inc. estimates that the final purchase price will be approximately $40 million.
Michigan Insurance Company writes various lines of property and casualty insurance and had direct written premiums of $106.6 million and net written premiums of $26.7 million for the year ended December 31, 2009. Effective on December 1, 2010, Michigan Insurance Company entered into a 50% quota share agreement with third-party reinsurers and a 25% quota share reinsurance agreement with Donegal Mutual Insurance Company to replace the 75% quota share reinsurance agreement Michigan Insurance Company maintained with West Bend through November 30, 2010. Donegal Mutual Insurance Company will include its assumed business from Michigan Insurance Company in its pooling agreement with Atlantic States Insurance Company. Over time, Donegal Group Inc. will have the ability to reduce the level of third-party quota share reinsurance and thereby provide additional premium growth. Based on Michigan Insurance Company's historical underwriting experience and profitability, Donegal Group Inc. believes the acquisition and reinsurance arrangements will be accretive to earnings in 2011.
Donald H. Nikolaus, President and Chief Executive Officer of Donegal Group Inc. said, "We are excited to announce the completion of our acquisition of Michigan Insurance Company as we expand our Midwestern operations into Michigan. We look forward to providing technology and operational support to Michigan Insurance Company to increase its efficiency and further enhance relationships with its agents and policyholders. We believe this acquisition will enhance our overall business and profitability and provide for significant future growth over time."
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